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Credit Cards.

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gbomb

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This isn’t your usual credit card thread.

No, I am interested in how many credit cards some of you different pizza operators have. And if you are willing to share, your credit score? Oh, and how important is a credit score if you want to open a business? Cash is king sometimes. But don’t landlords check credit scores before you sign a lease? And does anyone have any credit card tips or secrets they would like to share?

I currently have two cards. One I got back in 2004 from citi bank and one I got just last November, a Chase Amazon rewards card, when i decided to become a little more credit savvy and aware. Credit score is currently 680. Total credit limit is $5,600. I have two accounts on record that went into collection back in 2004. They both will be swiped from my credit report in less than two years.
 
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Happy New Year gbomb,

As for ‘credit repair’ its time and patience. There are numerous credit forums offering tips and experiences in cleaning up your credit profile, but it will take time, patience, and persistence. *Interesting how the financial industry manipulates the FICO by reducing/closing your accounts and/or limits - thereby lowering your fico score and justifying charging you a higher interest rate on a new account (which also lowers your score).

Frankly, imho, is not the time to worry about obtaining business credit. The financial industry is squeezing (bad terms, more fees, much higher rates, much lower limits) the consumer credit market for all its worth, and no one is lending to small business. For the most part, small regional banks are squeezed by bad commercial loans (see strip malls, malls etc…) and are looking to divest those loans, hence, no loans for folks in our line of work (even with excellent credit).

Unfortunately, the only people getting free money these days are the rich mega banks and despite their BS ads (see BOA) - they are not lending. They’re closing ‘old’ credit accounts (see better fico score) and offering new accounts (see lower fico score) at higher interest rates. Hmmmmm, lend me $$s at 0.25% and let me lend it at 29.99%, gee, wonder if I’ll be profitable??

In response to your first question: credit checks depend on the lender. Your credit score doesn’t reflect your ability to start a business so much as it reflects your ability (my opinion) to be successful at that business. A score of 600 reflects bad fiscal management and/or bad life experiences. For instance, an individual who is constantly late on payments may actually have a higher score than someone who goes bankrupt because their insurance carrier dropped them and refused coverage of their catastrophic illness (see cancer, etc…). *I’d rather lend to someone with no late payment history BEFORE they went BK because of illness, than to a 28 yo crack-head mortgage broker from the 2001-2006 (RIP) housing bubble. This brings to mind one of the fundamental reasons the boom was exploited. The industry loved how they could just lend money based on a credit profile, score, and stated income (and eliminate the positions of loan managers - who were responsible for interviewing and evaluating potential credit customers). The good loan manager would spot the 28 yo crack-head in 3 seconds, the computer scoring system would give him a loan in seconds. The good loan manager would give great consideration to lending to the recovering BK because of illness, the computer system wouldn’t even consider them.

To highlight how bad credit is these days, I was recently approached about doing business with SYSCO. They approached me. We have been in business for 3 years and doing well. Their credit department wanted me to PG the account and I said no (discussion on why an established business needed a PG vs. a new business with no credit history). They refused to grant credit to my business (even for a $300 truck). For comparison, officemax granted a $1K line without PG. Ehhhh, I don’t really care, I don’t need them (SYSCO). Its their loss - we will order north of $200K this year.
 
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You guys know I’m trying to bait…

The credit market is horrible. Bankers are making RECORD bonuses. Anyone… ???
 
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We keep three cards. One everyday personal card, one business expense card that we use for things like office supplies and an additional personal card which has no annual fee that we never use. We have the third card for when we travel in case something came up with the primary account.

I reduced the total credit limits on them a few years ago since they kept going up every year and were getting silly. Now the combined limit is 30K but it was up to 70K when I cut it back.

Getting credit has not been an issue. But we have a solid history.

Pizza 2007, you might find that adding Sysco to the mix will save you money. In my experience the food vendor prices get better when they know you are shopping. A PG costs you nothing as long as you are paying your bills. One solution (what I did) is to notate on the PG that “This guarantee shall expire 365 days after signing”. You get the benefit of some better pricing by shopping around with only a limited exposure to the PG.

Having a PG expire is a common approach on leases as well. The landlord or vendor has a legitimate interest in being paid but is often willing to give up that added security after a period of good payment performance.
 
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Maintaining a balance around 30% of your available credit is a good technique for improving you score.

BOA just closed my 10 year old account when I called to get a replacement card. My other card went from 9.99% to 29.99% in less than a year, so I was going to use them instead. Losing that account dropped my score 15 points because my debt/credit number changed dramatically. Of course, I was welcome to reapply in a month with BOA.

Get a real estate loan, that’s the easiest kind to get and pushes your credit score up the most. If you don’t already own a home, look into it, the government will give you 10% back on any house up to $80K right now if you’re a first time buyer or haven’t owned a home for 3 years.
 
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Bodegahwy, interesting that you actually lowered your limit from $70,000 to $30,000 when a lot of people are trying to raise theirs. But I guess $70,000 is quite excessive. Wouldn’t want those cards to end up in the wrong hands. And I imagine a $30,000 credit limit is plenty large enough to support a high credit score.

And what does “PG” mean in regards to a vendor account?

My next step, is to move the limit up on my Amazon rewards card so I can safely charge more than $300 (30%) a month on it.
 
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PG = Personal Guarantee

You’re saying that if your business goes under, you’ll cover anything you owe out of your own pocket.
 
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Really? I kind of just assumed that is how all vendor accounts worked. I mean if you owe money you have to pay it off.
 
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No, that’s why you set up an LLC or Corp. To defend your personal assets from any business loses.
 
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If I had to do it over again I would pay cash and never ever borrow a cent. If you use cash your credit score is irrelevent. We have perfect credit and got it from borrowing money and paying our bills on time…but in the end…we are slaves to the lender.

I am not defined by my credit score. I will never borrow money again. We use a personal debit card, and have 2 business debit cards for business expenses. Never had a problem using them. If I can’t pay cash I can’t afford it.

www.daveramsey.com

Borrowing money was my fools tax and boy is it expensive.

Kris :cry:
 
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